Trade liberalization of intermediate goods, financing constraints and the transformation of trade modes

PENG Dongdong1 Du Yunsu2

(1.School of International Business Administration, Shanghai University of Finance and Economics)
(2.School of International Economics and Business, Nanjing University of Finance and Economics)

【Abstract】Through the introduction of transformation of trade mode and financing con­straints into heterogeneous firm trade mode, this article analyzes the impact of trade liberalization, financing constraints on the choice of trade mode. Based on Chinese Industrial Enterprises Database and China Customs Database for 2000–2006, and taking China’s ac­cession to the WTO as a quasi-natural experiment, this article uses difference-in-difference (DID) method to verify the theoretical hypothesis. It concludes that trade liberalization of intermediate goods leads companies to export through general trade mode, and that the more dependent companies are on external financing, the more significant the selection effect of trade liberalization of intermediate goods on trade mode. After the robustness test from many perspectives, the conclusion is still tenable. The above research shows further trade liberalization is significant in transforming China’s trade development mode and enhancing China’s status in global value chain.

【Keywords】 intermediates trade liberalization; financing constraints; trade mode;

【DOI】

【Funds】 General Project of National Social Science Fund (16BJY069) Jiangsu University Social Science Project (2015SJB137)

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    Footnote

    [1]. ① Admittedly, processing exporters are more likely to be constrained in financing, but less for general exporters. In order to facilitate for analysis, this article hypothesizes processing exporters are not constrained in financing. [^Back]

    [2]. ② When company’s variable costs need external financing, trade liberalization of intermediate goods will influence the amount of export for general trade firms. But through empirical analyses, no significant impact of trade liberalization of intermediate goods is found on the amount of export of general trade firms. [^Back]

    [3]. ③Pairwise cross multiplications here are the cross multiplication of duty and dep, the interaction terms of post and dep, duty and fin, and post and fin. [^Back]

    [4]. ④ By matching the input-output statements of 122 sectors in 2002 and those of 135 sectors in 2007, 68 manufacturing industries have beenselected. According to the input-output sectors and HS 2007 corresponding table, the corresponding relations between these 68 industries and products may be obtained. By matching input-output sectors and CIC industrial classifications we can get the corresponding relationship among 68 industries and firms. [^Back]

    [5]. ⑤ Variable θjv here is calculated in the light of the input-output statements for 2002. The reason why this article uses the input-output statements for 2002 is that the input-output statements for 2000 contain 40 sectors. Using the input-output statements for 2000 and 2007, the number of manufacturing industry is less (only 22). [^Back]

    [6]. Ij denotes the product mix of industry j, nj the product number industry j contains and τit import tariffs for product i in year t. [^Back]

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This Article

ISSN:1002-4670

CN: 11-1692/F

Vol , No. 12, Pages 52-63

December 2016

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Article Outline

Abstract

  • Introduction
  • 1 Theoretical analysis
  • 2 Model setting, variable description and data source
  • 3 Empirical outcome analysis
  • 4 Conclusions and policy suggestions
  • Footnote

    References